A specialty contractor or subcontractor is a separate contractor hired by the prime contractor to perform certain portions of the work. The amount of work that the prime contractor will subcontract varies from project to project.
Some federal and state regulations limit the proportion of a project that may be subcontracted, but this is rarely the case in private work. There are advantages and disadvantages to using specialty contractors.
Trades such as plumbing, electrical, and heating and air-conditioning have a tradition of being performed by specialty contractors, due to their specialized nature and licensing requirements. However, specialty contractors can now be found who are capable of performing every aspect of the construction project.
Contractors today can construct entire projects without having any direct-hire craft personnel. The use of specialty contractors has gained popularity as a means to reduce risk and overhead; however, the contractor gives up a substantial amount of control when subcontracting the entire project.
If specialty contractors are to be used, the contractor must be certain to notify them early in the bidding period so that they have time to prepare a complete, accurate proposal. If rushed, the specialty contractor tends to bid high just for protection against what might have been missed.
The use of specialty contractors can be economical, but estimates still must be done for each portion of work. Even if the estimator intends to subcontract the work, an estimate of the work should be prepared. It is possible that the estimator will not receive proposals for a project before the bid date and will have to use an estimated cost of the work in totaling the proposal.
All subcontractors’ proposals are compared with the estimator’s price; it is important that a subcontractor’s price is neither too high nor too low. If either situation exists, the estimator should call the subcontractor and discuss the proposal with him.
The specialty contractor’s proposal is often phoned, faxed, or e-mailed into the general contractor’s office at the last minute because of the subcontractor’s fear that the contractor will tell other subcontractors the proposal price and encourage lower bids. This practice is commonly referred to as bid peddling or bid shopping and is highly unethical and should be discouraged.
To prevent bid shopping, specialty contractors submit their final price only minutes before the bids close, which leads to confusion and makes it difficult for the estimator to analyze all bids carefully. This confusion is compounded by specialty contractors who submit unsolicited bids. These bids come from specialty contractors who were not contacted or invited to submit a bid, but who find out which contractors are bidding the project and submit a bid.
Since these companies are not prequalified, there is an element of risk associated with accepting one of these bids. On the other hand, not using low bids from unsolicited subcontractors places the contractor at a price disadvantage.
In checking subcontractor proposals, note especially what is included and what is left out. Each subsequent proposal may add or delete items. Often the proposals set up certain conditions, such as use of water, heat, or hoisting facilities. The estimator must compare each proposal and select the one that is the most economical.
All costs must be included somewhere. If the subcontractor does not include an item in the proposal, it must be considered elsewhere. A tricky task for the prime contractor is the comparison of the individual subcontractor’s price quotes.
Throughout the estimating process, the prime contractor should be communicating with the specific subcontractors concerning the fact that they will submit a price quote and what scope of work is to be included within that quote. However, subcontractors will include items that they were not asked to bid and will exclude items that they were asked to bid.
A “bid tabulation” or “bid tab” is used to equalize the scope between subcontractors so that the most advantageous subcontractor’s bid can be included in the prime contractor’s bid.